The stock is down more than 9% in after-hours trading. It's trading below $25 for the first time.

Ad revenues were up 28% year-over-year on a quarterly basis.

That beats Wall Street's gimme estimates of 19%, but it's more worrisome revenue deceleration from a company that has a revenue multiple of 15X.

By comparison, Google's business grew 21% from a much larger base (~$40 billion annual revenues) during the second quarter. Its revenue multiple is only 5X.

Given the ongoing deceleration of Facebook's growth rate, it is laughable that people were recently saying that Facebook would quickly become bigger than Google. If it ever does become that big, it won't be because of its current ads business, that's for sure.

Facebook's profits are basically flat year-over-year because its operating profit margin has decreased. That's not good news for the stock (this was supposed to be a growth story). The margin is down because Facebook is investing, which is smart, but it's hurting the company's profitability.

We're going through disclaimers about forward-looking statements

Zuckeberg takes the phone

Zuckerberg is talking about mobile.

He expects 4 to 5 billion people to have smartphones. Building great services for the devices is important. People are adopting Facebook mobile services. 540 million. 67% more than the 325 million using it a year ago. These people are more active Facebook users. Mobile users are 20% more likely to use Facebook on any given day.

People are sharing a billion pieces of content through Open Graph, says Zuckerberg

Mark Zuckerberg talks about social ads.

The best type of advertising is a message from a friend. The more advertising includes interesting content from people you care about. Advertising on Facebook today is giving a good ROI, but it can be better and more social.

One important aspect of social ads is that they go to mobile and desktop. Social ads in News Feed are good for ads in mobile.

By the end of June, sponsored stories revenue was $1mm per day in revenue, half coming from mobile.

Sandberg talks about local advertising

Facebook is uniquely accessible to local advertisers because they are already setting up personal accounts. 11 mm businesses have pages on FB. 7mm are used every month. Hundreds of thousands of small businesses advertise on FB.

Last quarter tested making it easier. Page owners can turn a post into an ad with a few clicks.

For the rest of 2012, the focus will be on ramping up sponsored stories in news feed.

Analyst asks: Are younger people still using Facebook? Wants to know how big the company will be?

Mark answers.

Steady growth in engagement among all the cohorts, including younger ones.

We've always been signifcantly smaller per employee compared with the number of people we serve in the world. Says people love working at Facebook because of that. It's also part of strategy, he says. He says Facebook builds the platform, not the apps because of its limited human resources. "Over time it might make sense for us to build some of these things ourselves."

For the foreseeable future we're going to be way smaller than comparable companies.

Analyst: Do you think you need to own the entire experience (an integrated device) or is better to be an app?

Mark answers.

Facebook is the most used app on every mobile platform. He says, we want to increase the depth of the experience in addition to just growing users. We want to not just have apps that people use, but we want to support a development ecosystem. That's why we did the iOS integegration…there is a lot we can do "Without building out a new phone which wouldn't make much sense for us to do."

Analyst asks: What % of ads are social

Analyst: Are their ads other than Sponsored Stories that are doing well in testing? Why has DAUvsMAU ratio declined?

Sheryl answers.

We're also seeing good results from other ads that have social context. FBX is early, but we show promising results for advertiers. We're also optimistic about early testing around mobile. What people do there is look at their News Feed and share. Ads in News Feed therefore make sense on mobile. Advertisers get a high ROI.

Ebersmann takes second question.

We made some changes to background pinging. When phones contact our services without a user being on the other end, we don't count that as usage. That had some impact. There are some drops due to holidays.

Analyst: Will Facebook make more acquisitions like Instagram? Is 2Q the lowest quarter of the year in terms of growth?

Mark answers.

The acquisition hasn't closed so there has been no integration.

"Our strategy has been to buy companies for talent." Excluding Instagram, that is must of our acquisitions and it will be going forward.

Ebersmann takes the second question.

When we look at 2H this year, we will make optimizations: drive demand, better targeting, etc. The big priority and oppty is Sponsored Stories. It's difficult to forecast what that will look like. We didn't ramp up Sponsored Stories until June. We feel like we're a in a good position. The forecasting is difficult because we're going to proceed slowly. We don't want to move quickly because we don't want to hurt user-engagement. We will learn what kind of speed of ramp up works for us.

Analyst: What's taking so long with Sponsored Stories? What's taking so long on local?

Sheryl answers.

Looking at user-reaction.

Limiting the number we roll out. We intend to be cautious as we work on user-perception. Have not rolled out across all counties.

Sheryl answers the second question.

More than 40% of local business have no Web presence at all. Facebook has a huge advantage because those local business owners are using Facebook as users. When they use the product they see messages from other business. The product that we want them to use, Pages, is a lot like their own user profile. The leap is smaller.

Analyst: Want to know about the optionality of the Facebook platform: is their potential in commerce and video?

Mark answers.

The basic approach we have for now is that we are building out the platform and other companies are building on top of that. You can view this is an ads and payments business, or you can view us as a platform that will transform industries and get some portion of the value for that. The media companies that are building on Open Graph, we aren't contributing as much value as we did with games, so the value coming back to Facebook is less. Over time, more nuanced experiences will become social. We'll build out the tools to get those products built and we'll build to capture the value.

Sheryl offers an answer too.

The commerce companies that really adapting social are seeing great responses. Fab is one. It's seeing 20% to 40% of its traffic from Facebook on a daily basis. We look at what people's shopping behavoirs are and want to be a major part of how people discover products.

Analyst: What's taking so long in ads? Will their be paid apps in the App Center? Do you regret anything about the IPO?

Sheryl answers.

We're still in that learning curve that took TV and search so long. The good news is that our ROI results are strong – 3X and 5X. They are truly good. Our view is that our ads work, and if they continue to work we will be able to educate the market over time. We're on a good part of our growth trajectory.

Second question: no.

Ebersmaman answers last question. Obviously we're disappointed in where the stock is trading, but we think we are the same company we were before and that we'll be there in the long term.

Analyst: Why are Sponsored Stories taking so long? (popular question)

Mark answers.

We have robust systems built around metrics in the News Feed. What we've seen is we can put in good sponsored content and not have it degrade those metrics. We're rolling out Sponsored Stories conservatively because we want to keep the quality high.

Analyst: Will Facebook's preferred marketer developer numbers grow?

Sheryl answers.

We're optimistic. We want to make everyting people do social. We focus on how many developers are using our tool, how many of those apps are growing quickly, and how many are using ads. We're going to provide the ID and social layer for everything across Web and social layer. If you're choosing to develop a service, you'd choose to do it with us. We consider ourselves a partner company. We want to take social companies and make them big, and take big companies and make them social.